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Remembering Hal Finney on the 14th Anniversary of the First Bitcoin Transaction

Validated Individual Expert

It’s been 14 years since the first bitcoin transaction was sent. On Jan. 11, 2009, Satoshi Nakamoto, the pseudonymous creator of the Bitcoin system, sent Hal Finney, a well-regarded cryptographer and computer scientist, 10 bitcoin (BTC). This test transaction, sent before BTC had a quotable price, was a harbinger of the many peer-to-peer transfers to come enabled by the world’s first cryptocurrency network.

Finney, who died in August 2014, was also the first person besides Satoshi to download and run Bitcoin’s software. He detailed his story in a 2013 BitcoinTalk forum post, where he said he was the first person Phil Zimmerman, another legendary cypherpunk, hired for the PGP Corporation to build the Pretty Good Privacy encryption solution.

“When Satoshi announced the first release of the software, I grabbed it right away,” Finney wrote. He was primed to find interest in a project that separates money from politics and enables user-sovereignty over their wealth, having experimented with earlier instantiations of “digital cash.” Others, Finney claimed, were initially more skeptical.

“Cryptographers have seen too many grand schemes by clueless noobs. They tend to have a knee-jerk reaction,” Finney wrote. So he mined a few coins, found a few bugs and let the software run for a few days before determining the protocol was stable but draining on his computer’s CPU, and so switched it off.

In August 2009, a few months after he was the first to download, receive and walk away from bitcoin, Finney was diagnosed with Lou Gehrig's disease (or amyotrophic lateral sclerosis) – a debilitating illness that attacks a person’s nervous system. ALS left him paralyzed within the span of a few years.

He eventually found his way back to Bitcoin, to which he contributed after his illness forced him into an early retirement. At the time he was writing out his recollections, Finney was building a new type of wallet. “It's very slow, probably 50 times slower than I was before. But I still love programming and it gives me goals,” he said.

Bitcoin was a project he could see growing very quickly. In a received email to Nakamoto, Finney was one of the first to put a price on the cryptocurrency. Estimating a fraction of total global household wealth would spill into the project, each of the 21 million coins could one day be worth $10 million.

“Since we're all rich with bitcoins, or we will be once they're worth a million dollars like everyone expects, we ought to put some of this unearned wealth to good use," he wrote in a separate 2011 Bitcoin Talk post. If it sounds lofty, Finney was aware of the speculative side of cryptoeconomics.

"The danger is if people are buying bitcoins in the expectation that the price will go up, and the resulting increased demand is what is driving the price up. That is the definition of a BUBBLE, and as we all know, bubbles burst," he wrote. His other economic predictions – like the nature between the network's growth and security – have more or less been born out.

Finney is commonly suspected to have invented Bitcoin. Beyond the fact that coders are often their own first users and business-founders their own first customers, Finney certainly had the chops to design something like Bitcoin, which combined several pre-existing cryptographic and computational ideas in a novel way.

For instance, Finney created the first reusable proof-of-work system in 2004, building on the original proof-of-work algorithm designed by Adam Back (another Satoshi contender), allowing people to redirect computational energy towards a useful purpose. Finney's use case for RPoW was a digital token system.

If Satoshi’s “true” identity didn’t matter then, it hardly matters now. Finney wrote that in his correspondence with Satoshi he thought he was dealing with a “very smart and sincere” person – a quality he learned to recognize over the years. But what mattered most was that the code ran, and the idea was sound.

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